Law & Economics

Question 1

L1 - What is tort law?

Answer 1

A civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits a tortious act.

It fills a gap in the legal system a victim cannot use contract or property law to sue when there is no breach of contract, no damage to property or no continuing harm.

Question 2

L1 - Tort Law- What three liabilities do we use to access for care incentives in unilateral care?

Answer 2

1. No Liability
2. Strict Liability
3. Negligence Liability.

Question 3

L1 - Tort Law - Unilateral Care?

Answer 3

When the other party couldn’t have prevented the accident.

Question 4

L1 - Tort Law - Bilateral Care?

Answer 4

When the other party could have done something to prevent an accident - e.g. swerving their car to avoid a crash.

Question 5

L1 - Tort Law - What does Bilateral Care include?

Answer 5

Contributory and comparative negligence.

Question 6

L1 - Tort Law - What are the two other main bodies of law?

Answer 6

Property Law and Contract Law.

Question 7

L1 - Tort Law - Where are the routes of the word Tort from?

Answer 7

Tort means “law -French” and is derived from the Latin word “tortus” meaning “twisted”.

Question 8

L1 - Tort Law - What is the economic purpose of tort liability?

Answer 8

Tort laws use of liability to internalise externalities created by high transaction costs (relative to the chance of injury), which is done by having the injurer compensate the victim.

Question 9

L1 - Tort Law - What are the three elements the must be present for recovery by the plaintiff under the traditional theory of torts?

Answer 9

1. The plaintiff must have suffered HARM.
2. The defendant’s act or failure to act must CAUSE THE HARM; and
3. The defendants act or failure to act must constitute the BREACH OF A DUTY OWED to the plaintiff by the defendant.

Question 10

L1 - Tort Law - How do we separate the harm aspect of tort law?
Simple Definition of main word?

Answer 10

1. Pecuniary Losses.
2. Non-pecuniary Losses.

Pecuniary: relating to or consisting of money.

Question 11

L1 - Tort Law - Pecuniary Losses?

How easy are they to calculate and what are some examples?

Answer 11

AKA ‘specific damages’.

Easier to calculate as there are records of losses. Examples include: lost earnings, damaged car, medical expenses.

Question 12

L1 - Tort Law- Non-Pecuniary Losses?

How easy are they to calculate and what are some examples?

Answer 12

AKA ‘general damages’ or ‘pain, suffering and loss of amenity’ - PSLA.

Harder to calculate because the harm is subjective. Judicial guidelines are published to help and draw on case law to provide a guideline.

Examples include: Pain, suffering or loss of ability to enjoy life or undertake everyday tasks, loss of congenial employment, reduced labour market prospects or reduced marriage prospects.

Question 13

Amenity?

Answer 13

A desirable or useful feature or facility of a building or place: the property is situated in a convenient location, close to all local amenities.

Question 14

Congenial?

Answer 14

Pleasing or liked on account of having qualities or interests that are similar to one’s own.

Question 15

L1 - Tort Law - Harm?

Overview.

Answer 15

Divided into pecuniary and non-pecuniary losses.

Judiciary guides are published to assist.

Question 16

L1 - Tort Law - But-for test?

How does it link in with the “cause-in-fact”?

Answer 16

Used to establish whether the cause aspect of tort law is satisfied.

But for action A, would event B have occurred.

If No, A is the cause-in-fact.

Question 17

L1 - Tort Law - CAUSE of harm?

What is the main test

Answer 17

Used to decide whether one action or inaction has caused another. The defendant must have caused the plaintiffs harm.

Two types of cases are distinguished by the law:

1. The cause in fact (using the but for test)
2. The primate cause.

The action must be the the cause and effect, and the proximate cause.

Question 18

L1 - Tort Law - Criticism of the But for test and Cause and fact?

Answer 18

The But-for test allows distant causes to have the same weight as proximate causes. e.g. If someone hit someone and broke their nose, the cause and fact of the injury would be the fist, but it would also be the fact that the defendant was born.

The but-for test therefore does not discriminate between the proximate cause and the remote cause.

Question 19

L1 - Tort Law - PSLA

Answer 19

Pain suffering and loss amenity.

Question 20

L1 - Tort Law - Barnet v Chelsea and Kensington Hospital (1969)

Answer 20

Used to show the use of the “But-for” test.

Barnet went into hospital complaining of vomiting and stomach pains. The nurse called the doctor on duty who advised Barnet to see
the GP in the morning. Barnet died five hours later from arsenic, before seeing the GP. His family sued, claiming that the hospital’s decision not to examine him when he presented at
hospital had caused his death, but the court held that the hospital had not caused the death because no treatment would have saved Barnet from the arsenic poisoning – i.e. would the
result have occurred but for the act of omission by the hospital? (The court felt the answer to this was “Yes”.)

Question 21

L1 - Tort Law - What case would we reference when looking at proximity and causation?

Describe the case.

Answer 21

Palsgraf vs Long Island Railway Co. (1928).

Plaintiff [Mrs. Palsgraf] was standing on a platform of defendant’s railroad after buying a ticket to go to Rockaway Beach. A train stopped at the station, bound for another place. Two men ran forward to catch it. One of the men reached the platform of the car without mishap, though the train was already moving. The other man, carrying a package,
jumped aboard the car, but seemed unsteady as if about to fall. A guard on the car,
who had held the door open, reached forward to help him in, and another guard on the
platform pushed him from behind. In this act, the package was dislodged, and fell upon the rails. It was a package of small size, about fifteen inches long, and was covered by a newspaper. In fact it contained fireworks, but there was nothing in its appearance to give notice of its contents. The fireworks when they fell exploded. The shock of the explosion threw down some scales at the other end of the platform many feet away. The
scales struck the plaintiff, causing injuries for which she sues.

The New York court determined that the railroad was not liable for Mrs. Palsgraf’s injuries because the railroad guard’s actions in pushing the passenger were too remote in the chain of causes to be deemed the legal cause of the plaintiff’s harm.

Question 22

L1 - Tort Law - Define Duty of Care?

Answer 22

The duty to take REASONABLE CARE when performing acts that could FORESEEABLEY harm others.

Question 23

L1 - Tort Law - Duty of Care and the liability rules?

Overview.

Answer 23

Not all rules in tort law impose a duty of care on the parties. e.g. strict liability.

Question 24

L1 - Tort Law - How does strict liability differ from no liability or negligence liability and what does it generally apply to?

Answer 24

Strict liability only relies on harm and proximate cause, not the third element of breach of duty.

It generally applies “abnormally dangerous activities” such as blasting with dynamite.

Question 25

L1 - Tort Law - What is said of an injurer if they break legal duty?

Answer 25

They are “at fault” or have been “negligent”

Question 26

L1 - Tort Law - A negligence rule?

Answer 26

A rule of liability requiring the plaintiff to prove harm, causation and fault. The defendant escapes liability if they applied the standard care to avoid harm that they caused.

Question 27

L1 - Tort Law - How do we evaluate the duty of care rule?

Answer 27

Duty of care is represented by a continuous variable, as we often have to surpass a level in order to be negligent, and multiple factors can contribute towards this.

We set the precaution equal to x’. LHS is negligent and RHS is not-negligent.

Question 28

L1 - Tort Law - How is duty of care determined by the law?

Answer 28

1. Regulation and Laws - e.g. speed limits, safety helmets.
2. Case Law - Unites States v Carroll Towing Co (1947)
3. Social Norms and Customs - ‘mirror, signalling and manoeuvre’, accepted medical protocol.
   Note: These can often evolve into laws, such as thbolarm test in clinical negligence cases.

Question 29

L1 - Tort Law - United States Vs Carrol Towing case.

What is this an example of?

Answer 29

The case concerned the loss of a barge and its cargo in New York Harbor. A
number of barges were secured by a single mooring line to several piers. The defendant’s tug was hired to take one of the barges out of the harbor. In order to release the barge, the crew of the defendant’s tug, finding no one aboard in any of the barges, readjusted the mooring lines. The adjustment was not done properly, with the result
that one of the barges later broke loose, collided with another ship, and sank with its cargo. The owner of the sunken barge sued the owner of the tug, claiming that the tug owner’s employees were negligent in readjusting the mooring lines. The tug owner
replied that the barge owner was also negligent because his agent, called a “bargee,”
was not on the barge when the tug’s crew sought to adjust the mooring lines. The
bargee could have assured that the tug’s crew adjusted the mooring lines correctly.

The plaintiff was found negligent for not having a bargee aboard during the working hours of daylight.

This is an example of case law that can be used to establish reasonable care.

Question 30

L1 - Tort Law - Bolam v Friern Hospital Management Committee (1957)

Answer 30

Bolam suffered fractures while receiving electro-convulsive therapy (ECT). He claimed damages for negligent care on the grounds that (i) no muscle relaxant had been administered; (b) he was not restrained during the procedure; and (c) he had not been warned of the risks.
The claim failed because the court accepted that none of (a)-(c) was inconsistent with
accepted medical protocol and, as such, Bolam’s medical team had not breached their duty
of care towards him. As a result of this case, it is possible for a medic/team to avoid negligence liability if s/he/it can show that a responsible body of medical professionals in the
same field would regard the care in question as acceptable – this is the ‘Bolam test’.

Question 31

L1 - Tort Law - Bolam Test?

Answer 31

It is possible for a medic/team to avoid negligence liability if she/he/it can show that a responsible body of medical professionals in the
same field would regard the care in question as acceptable.

Question 32

L1 - Tort Law - Economic Theory of Tort Law Model - SC, w, x, p(x) & A?

How does p(x) change with increases in x?

Answer 32

SC: Social Cost
w: cost of precaution (care) per unit
x: precaution (i.e. the injurers care)
p(x): probability of an accident given care. It is a decreasing function of x, as the more care you give, the less effective it is.
A: Monetary cost of harm (e.g. medical costs, damage etc).

A precaution (x) increases, p(x) decreases.

Ap(x) is expected harm in dollars.

wx is the total amount spent on precaution.

Question 33

L1 - Tort Law - Economic Theory of Tort Law Model - What is the Social Care formula and what do the composite parts intuitively represent?

What is the only diminishing part of the function?

Answer 33

SC = wx + p(x)A

wx is the total amount spent on precaution.

p(x)A is expected harm in dollars.

More care lowers the probability of an incident but we have a diminishing returns to care.

Question 34

L1 - Tort Law - Economic Theory of Tort Law Model - What does the Unilateral Social Care graph look like?

What is the point minimises the expected social costs?

Answer 34

Brainscape Companion 1.

Question 35

L1 - Tort Law - Economic Theory of Tort Law Model - Given the Social Cost function, SC = wx + p(x)A, how do we solve to attain x*, the lowest social cost?

Answer 35

Social optimal care solves:

(1) min wx + p(x)A
(2) FOC of

Question 36

L1 - Tort Law - Economic Theory of Tort Law Model - What is the marginal social cost and marginal social benefit?

Answer 36

Marginal Social Cost: w,
being the cost of precaution.

Marginal Social Benefit, -p’(x*)A.
This is the reduction in the expected cost of harm, being the reduction in the probability of an accident, denoted by p’, multiplied by the cost of harm, A.

Question 37

L1 - Tort Law - Economic Theory of Tort Law Model - What level of precaution x* is efficient (use formula)?

Answer 37

When:

MSC = MSB
w = -p'(x*)A

When precaution is efficient, the cost of a little more precaution (marginal
cost) equals the resulting reduction in the expected cost of harm (marginal benefit).

Question 38

L1 - Tort Law - Jones v Wilkins (2001) case?

Answer 38

Wilkins drove their car into another car carrying a 3 year old child called Jones, who was severely injured. At the time, Jones was sitting on his mother’s knee in the
passenger seat; both were secured by a lap belt (and the mother by a diagonal belt as well).
Wilkins claimed that Jones was not reasonably secured and this contributed to his injuries – expert evidence supported this view. The court shared liability between Wilkins (75%) and
Jones’ mother (25%).

Question 39

L1 - Tort Law - Pidgeon v Doncaster Health Authority (2002) case?

Answer 39

Pidgeon was declared clear of cervical cancer
following a smear test in 1988; in fact, the test showed pre-cancerous growth and in 1997 she
tested positive for cancer. Between 1988 and 1997 she had ignored 7 verbal and 4 written
invitations to a further test. Pidgeon sued Doncaster HA for negligently failing to diagnose
the initial growth in 1988. The HA countered that she was at fault for ignoring subsequent
invitations. The court held that the HA had caused the problem and was negligent, but that
Pidgeon was as well: it reduced her damages by 2/3 to reflect this. (NB: This was one of the
first cases in which a patient was held partially liable for her loss; previously, courts had taken
the view that health care providers had responsibility for patient health and care outcomes.)

Question 40

L1 - Tort Law - Unilateral vs Bilateral?

Answer 40

Unilateral: Performed by or affecting only one person, group, or country involved in a situation, without the agreement of another or the others.

Bilateral: Having or relating to two sides; affecting both sides.

Question 41

L1 - Tort Law - What can we say with regards to unilateral care when the potential injurer’s choice of care x = x* (the socially optimum)?

Answer 41

There is optimal deterrence.

Question 42

L1 - Tort Law - Highlight the three liability rules in unilateral care and when the rule will be used.

Use examples for strict and negligence liability.

Answer 42

No liability
• A benchmark case when there is no liability rule in use

Strict liability
• A rule where the potential injurer is liable to pay damages when there is cause and harm
• E.g. many instances of products liability make manufacturers strictly liable:

Negligence liability
• A rule where the potential injurer is liable to pay damages when there is cause, harm and the
breach of a duty of care
• E.g. a driver can avoid liability for an accident if s/he can show that she was driving with
reasonable care

Question 43

L1 - Tort Law - Unilateral Care - Solve the outcome in the choice of a potential injurer when there exists NO LIABILITY?

What is the outcome with regard to the socially optimum amount?

Answer 43

They never have to pay for harm, so set A = 0.
Solve for Min wx
x = 0, where x is the precaution.

No liability leads to under-deterrence.

See BSC 2 for Graph.

Question 44

L1 - Tort Law - Unilateral Care - Solve the outcome in the choice of a potential injurer when there exists STRICT LIABILITY?

What is the outcome with regard to the socially optimum amount?

Answer 44

Potential injurer solves
min 𝑤𝑥 + 𝑝 (𝑥) 𝐴

• This is precisely what society solves in (1)

• Thus, the FOC is the same as (2) and the potential injurer chooses 𝑥 = 𝑥[socially optimum) = 𝑥*
• Under strict liability, the potential injurer faces all the expected costs of
his/her actions and therefore
• Strict liability provides optimal incentives for deterrence.

Question 45

L1 - Tort Law - Unilateral Care - Solve the outcome in the choice of a potential injurer when there exists NEGLIGENCE LIABILITY?

What is the outcome with regard to the socially optimum amount?

Answer 45

Assume that the court wishes to see 𝑆𝐶 minimised
• I.e. 𝑥 = x*
• Potential injurer solves
min

𝑤𝑥 + 𝑝(𝑥)𝐴
if 𝑥 < x*

𝑤𝑥
if 𝑥 ≥ 𝑥*

• I.e. a ‘mixture’ of ’no liability’ and
‘strict liability’
• Thus, negligence liability provides
optimal incentives for deterrence

See BA 3 for graph.

Question 46

L1 - Tort Law - Unilateral Care - What comments can we make about the outcomes for the different liability rules with out simple SC model?

Answer 46

No liability generates under-deterrence, with the victim internalising the marginal costs and benefits of precaution.

Strict and negligence liability both produce the same efficient and optimal outcome.

There is a distributional difference in that the injurer only pays out when the duty of care has not been met under NL, but always pays out under SL despite the outcomes being the same.

Is this reasonable to assume though? Maybe our model is too simple.

Question 47

L1 - Tort Law - Bilateral care notation:
x|i|
w|i|
x|v|
w|v|
p(x|i|, x|v|) 
p|i|
p|v|

Answer 47

x|i|: care supplied by potential injurer.

w|i|: per unit cost of care.

x|v|: care supplied by potential victim.

w|v|: per unit cost of care.

p(x|i|, x|v|): Accident probability,
where p|i| = 𝛅p/𝛅x|i|

Question 48

L1 - Tort Law - Bilateral Care - What equation does Socially Optimal Care solve?

FOC’s?

Answer 48

min w|i| x|i| + w|v| x|v| + p(x|i|, x|v|)A

See BA 4 for FOC’s

Question 49

L1 - Tort Law - Bilateral Care - No Liability care incentives for victim and sufferer?

With equation solution and FOC.

Answer 49

We already know that the potential injurer has insufficient incentives for care.

• The potential victim solves
min
𝑤|v|𝑥|v| + 𝑝(x|i|, x|v|)A

FOC
𝑤|v| = −𝑝|v|𝐴

• This is the socially optimum care FOC, so the victim supplies optimal care (𝑥|v|*)

• When both parties can supply care, a ‘no liability’ rule gives the potential
injurer insufficient incentives for care and the potential victim optimal
incentives for care.

Question 50

L1 - Tort Law - Bilateral Care - Strict Liability care incentives for victim and sufferer?

With equation solution.

Answer 50

Potential injurer has optimal incentives for care.

Potential victim receives damages (D) as compensation:
min w|i| x|i| + p(x|i|, x|v|)A - p(x|i|, x|v|)D = w|v| x|v|

As this is a position of no liability, the potential victim chooses x|v| = 0 < x|v|*.

Therefore, the potential injurer has optimal incentives for care and the potential victim has insufficient incentives for care.

Question 51

L1 - Tort Law - Bilateral Care - What are the two Negligence Liability rules used by the courts, definitions and intuitive meanings?

Answer 51

Contributory negligence:
The injurer may use the defence that the victim ‘contributed’ to the accident
happening.
Injurer liable if they haven’t supplied sufficient care and the plaintiff has.
No liability if they supply sufficient care or the plaintiff hasn’t supplied sufficient care.

Comparative negligence:
Both parties share liability for the accident depending on how much care they
supplied

Question 52

L1 - Tort Law - Bilateral Care - Contributory Negligence - When is the injurer liable/ not liable and provide an example.

Answer 52

Contributory negligence:
The injurer may use the defence that the victim ‘contributed’ to the accident
happening.

Injurer liable when x|i| < x|i|*
AND x|v| ≥ x|v|*

Injurer not liable when
x|i| ≥ x|i|* OR x|v| < x|v|*

e.g. A swimmer dives into shallow end and hurts herself. She sues the pool for not having ‘Shallow End’ signs. Pool admits this (i.e. 𝑥|i|] < 𝑥|i|) but claims the
swimmer contributed by not checking the depth before diving – there were other signals of depth (e.g. toddlers in arm-bands, adults paddling). Pool owner is liable under unilateral
negligence but may have a defence under contributory negligence (because perhaps 𝑥|v| < 𝑥|v|)

Question 53

L1 - Tort Law - Bilateral Care - Comparative Negligence - When is the injurer liable/ not liable and provide an example.

Answer 53

Comparative negligence:
Both parties share liability for the accident depending on how much care they
supplied.

Injurer 100% liable when x|i| < x|i|* AND
x|v| ≥ x|v|*

Victim 100% liable when
x|i| ≥ x|i|* OR x|v| < x|v|*

Parties share liability when
x|i| < x|I|* ANS
x|v| < x|v|*

e.g. A car accident occurs in a 30mph zone. Driver 𝑖 damages Driver 𝑣’s car. Driver 𝑖 was driving at 40mph, Driver 𝑣 was
driving at 35mph.
s|i| = 2/3
s|v| = 1/3

See BS 5 for more clarity and proportion liability formula.

Question 54

L1 - Tort Law - Bilateral Care - Comparative Negligence Case examples previously shown.

Answer 54

• Jones v Wilkins (2001)

* Pidgeon v Doncaster Health Authority (2002)

Question 55

L1 - Tort Law - Name all the cases used in the first lecture.

Answer 55

Barnet v Chelsea and Kensington Hospital (1969) - Arsnic

Palsgraf v Long Island Railway Co. (1928)
- Fireworks

United States v Carroll Towing Co (1947)
- Contributory Negligence - Bargee

Bolam v Friern Hospital Management Committee (1957) - Clinical Negligence and Common practice.

Jones v Wilkins (2001) - Car seat (comparative negligence)

Pidgeon v Doncaster Health Authority (2002)
(Cervical Cancer, Comparative Negligence)

Further examples included the swimming pool with lack of signage and a car accident with both drivers travelling at over 30mph.

Question 56

L1 - Tort Law - What does x* equal?

Answer 56

x* = - ln (w/A)

Question 57

L1 - Tort Law - Bilateral Care - What is the NE for Contributory Negligence?

Answer 57

Both parties choose x. There is no incentive to go below for either party, as if the other party chooses over x, the party in question would be entirely liable.

There is equally no incentive to deviate above as this will lead to the same payout.

Question 58

L1 - Tort Law - Bilateral Care - What is the NE under comparative negligence?

Answer 58

Both parties chooses x. If one party chooses below x, the other party can receive full liability by choosing x*.

If a party chooses x, it is optimal for the other party to also choose x.
If a party chose over x, they would receive the same outcome from choosing x.

Question 59

L1 - Tort Law - Bilateral Care - Comparative negligence formula when both parties are negligent?

Answer 59

s|k| = (x|k| - x|k|) / [(x|i| - x|i|) + (x*|v| - x|v|)]

where s|k| is party k’s proportion of the liability, with k ε {i,v}

Question 60

L1 - Tort Law - What can we say about the outcomes of no liability, strict liability and negligence liability in generating optimal care?

Answer 60

Only negligence liability generates optimal care from both parties when there is bilateral care.

Question 61

L1 - Tort Law - Bilateral Care - What would the NE be in contributory care?

Answer 61

For both parties to provide care at the optimum level. See See BA 6 for more information if this doesn’t make sense.

Question 62

L1 - Tort Law - How do we simplify our approach to evaluating errors?

Answer 62

We look at unilateral care and focus and strict and negligence liability.

Question 63

L1 - Tort Law - What two kinds of errors do we focus on?

Answer 63

Injurer’s errors in assessing A or p (these affect the injurers choice of care)

Court Errors in assessing A or p (these affect the court’s view of x*)

Question 64

L1 - Tort Law - Injurer’s errors - Negligence Liability - How does an over or under estimation effect our graph?

What is the outcome in terms of the minimum care?

Answer 64

Underestimating 𝐴 or 𝑝 shifts the 𝑤𝑥 + 𝑝 (𝑥) 𝐴 curve down.

**Down, Left of minimum care.

Overestimating 𝐴 or 𝑝 shifts the 𝑤𝑥 + 𝑝 (𝑥) 𝐴 curve up.

** Up, Right of minimum care.

Using the FOC [w = -p’(x*)A] , the injurer’s projected minimum care will shift in the same direction as the change in A or p. This will lead to ** results.

So over or underestimating A or p will lead to an overestimating or underestimating the minimum care.

Question 65

L1 - Tort Law - Negligence Liability Injurer’s Errors - What is the effect of errors on the precaution taken?

Hint: Graph

Answer 65

See BA 7.

Only large underestimates by the injurer will result in a change in precaution, as the minimum point will remain below the underestimated minimum point.

Regardless of the injurer’s error, the costs will jump down when the injurer satisfies the legal standard; so, the injurer still minimises expected costs by setting his or her precaution equal to the legal standard.

The graph would shift the minimum point but not by enough to drop the point below the SC minimisation point.

Question 66

L1 - Tort Law - Strict Liability - What can be said if the court consistently over of under compensates for damages?

Answer 66

Consistent court errors in setting damages under a rule of strict liability cause the injurer’s precaution to respond in the same direction as the error.

Consistent court errors in failing to hold injurers liable under a rule of strict liability cause subsequent injurers to take less precaution.

Think back to the graph to make sense of why this would be.

Less precaution will be taken if damages awarded are lower.

Question 67

L1 - Tort Law - Errors under strict and negligence liability - how can we summarise the outcome with regards to the injurer over or underestimating A or p?

Answer 67

Errors in 𝐴 or 𝑝 affect care (in the
same direction) under strict
liability. ‘Large’ underestimates in
𝐴 or 𝑝 lead to lower care under negligence liability

Question 68

L1 - Tort Law - Court Error in Assessing Minimum SC - Strict Liability Effects for the injurer?

Answer 68

The injurer always pays damages, so will minimise their own cost function.

The court’s may offer more or less in damages, but this is independent of the cost function.

Question 69

L1 - Tort Law - Court Error in Assessing Minimum A & p - Negligence Liability Effects on the Injurer’s decisions?

Answer 69

See BA 8.

Injurer’s minimise their costs by conforming exactly to the legal standard, regardless of whether it exceeds or falls short of efficient precaution.

Injurer’s precaution responds exactly to court errors in setting legal standard under a negligence rule

Question 70

L1 - Tort Law - Summarise Tort Liability.

Answer 70

Tort liability attempts to compensate and deter in circumstances
where accidents and injuries have taken place

Torts require harm, cause and breach of duty of care (But strict liability ‘suspends’ the ‘duty of care’ criterion)

Optimal precaution minimises social costs of accidents

Question 71

L1 - Tort Law - What are the different tort liability regimes and how can their effects vary?

Answer 71

No liability, strict liability, negligence liability.

They can vary in effects due to the number of parties taking care and through the presence of errors.

Question 72

L2a - Clinical Negligence and Deterrence - What is clinical negligence known as in the US?

Answer 72

Clinical Malpractice.

Question 73

L2a - Clinical Negligence and Deterrence - What countries outside of the the UK also using a negligence liability system?

Answer 73

Many US States
Australia
Canada

Question 74

L2a - Clinical Negligence and Deterrence - What is required in under the NHSLA definition for a claim to be considered?

Answer 74

Harm, cause and a breach of a duty of care.

Question 75

L2a - Clinical Negligence and Deterrence - What is the ‘no fault’ system and which countries have adopted this system?

Answer 75

The no fault system indemnifies the plaintiff for losses without need for any information about who was at fault.

Countries operating under this system include:
Sweden,
New Zealand and
Some US States.

Question 76

L2a - Clinical Negligence and Deterrence - What are the three objectives of clinical negligence systems?

Answer 76

1. Compensation
2. Deterrence
3. Administrative Efficiency

Question 77

L2a - Clinical Negligence and Deterrence - What is the name of the overall structure for overlooking, monitoring and auditing the NHS.

Answer 77

The Care Quality Commission.

Question 78

L2a - Clinical Negligence and Deterrence - What are the two options for an individual if they have a bad experience with the NHS?

Answer 78

1. Complain

2. Negligence Claim

Question 79

L2a - Clinical Negligence and Deterrence - Enterprise Liability

Answer 79

Enterprise liability is a legal doctrine under which individual entities can be held jointly liable for some action on the basis of being part of a shared enterprise.

E.g. since 1990, NHS Hospitals rather than clinicians have been sued for clinical negligence.

Question 80

L2a - Clinical Negligence and Deterrence - What NHS agency has been response for organising the defence of clinicians being sued?

Answer 80

the NHS Litigation Authority (NHSLA).

In 2017 this became the NHS Resolution (NHSR)

Question 81

L2a - Clinical Negligence and Deterrence - How does the NHSR Operate?

Answer 81

Premiums are collected from hospitals.
Defences on behalf of the clinicians/ hospitals against negligence allegations are progressed.
Payouts are organised if negligence conceded or found by court.
The CNST has been the scheme that has covered full liability of all member hospitals since 2002.

Question 82

L2a - Clinical Negligence and Deterrence - CNST abbreviation meaning and function?

Answer 82

Clinical Negligence Scheme for Trusts (CNST)

Membership to the scheme is voluntary (although all NHS hospitals are currently members)

It’s a pay-as-you-go schema, with expected liability of hospitals being calculated based on their types of activity. Premiums are then calculated accordingly.

Question 83

L2a - Clinical Negligence and Deterrence - What are the concerns with clinical negligence?

Answer 83

Volume of claims are large and potentially hard to control.

Costs such as damages and legal costs represent a big opportunity cost for the NHS and are potentially hard to control.

There exists disincentives to make claims such as the cost and delay in payment.

Question 84

L2a - Clinical Negligence and Deterrence - What causes such a high cost for negligence claim payouts?

Answer 84

Higher damages present in very high cost claim. (8% of claims account for 83% of damages). A small change in a year can have large effects.

Increasing legals cost for a large number of low value claims.

Question 85

L2a - Clinical Negligence and Deterrence - If we assume that the NHS is underestimating the costs of accidents (A) or the risk of accident (p) which is leading to them providing insufficient care, what issues might we worry about with the current system?

Answer 85

What percentage of injuries are actually compensated?

Does insurance dilute incentives?

Are there principal-agent problems in enterprise?

Or maybe there is over-deterrence in the form of defensive medicine.

Question 86

L2a - Clinical Negligence and Deterrence - NHS - What evidence is there to suggest p might be higher than the NHS could suspect?

Answer 86

With only 4% of adverse events becoming claims, maybe hospitals perceptions of p are too low. (according to research by the Public Accounts Committee).

Therefore the NHS may deem p to be low rather than high risk, as only a minority of claims come back to them.

Question 87

L2a - Clinical Negligence and Deterrence - Why don’t all adverse events become claims?

Answer 87

Cost of perusing claims, with particular focus on the disproportionate costs of low value claims.

Delays

Some prefer to make complaints and not sue for damages.

Ignorance of patience who suffer harm.

Question 88

L2a - Clinical Negligence and Deterrence - What are the statistical outcomes in terms of claims leading to full compensation, going to court and being settled?

What is the result on the perceived A?

Answer 88

2016/17:

55.5% of claims settled.
55.8% of all claims received damages.
so 99.5% of claims that paid damages didn’t go to trial.

Note that most cases that settle involve compromise as the parties are trying to avoid what could be a costly trial.

We can therefore conclude that most payments are below the full extent of the damages.

This could be argued to mean hospitals may view A as low.

Question 89

L2a - Clinical Negligence and Deterrence - How can we relate being insured by the NHSR to our model and graph?

Answer 89

Being insured is like setting A=0.

We no the X|no liability| < x*.